11th Aug 2019
Britain’s preparation for maintaining trade ties globally in event of a no-deal Brexit
As part of the European Union (EU), Britain was a beneficiary to about 40 free trade deals which covered more than 70 countries spread globally. It essentially meant that the UK could trade with countries such as Canada without paying taxes (tariffs) for importing most goods. In case the country decides to leave the EU, without striking a deal first with the bloc, it stands to suddenly lose its tax-free access to these markets.
In a bid to avoid this bleak economic situation, the UK government is striving to roll over the existing free trade deals EU has with other countries. These deals are worth almost 11% of total annual UK trade. In case Brexit goes through as planned on 31 October, Britain would be at liberty to negotiate trade deals with countries where the EU currently has no trade agreement – including the US. However, the UK would also need to negotiate a fresh trade deal with the EU to continue tariff-free access to its market.
In 2018, EU accounted for 46% of UK exports, while US, the single largest trade partner accounted for around 19%.
UK is trying to replicate the EU trade agreements with partner countries and have them in place in the no-deal Brexit scenario. Till last count Britain had reached agreements on 13 deals covering 38 countries. Thus far, the prominent agreements struck include the deal with South Korea. The agreement, which was the first struck in Asia, is said to be largely along the lines of the existing Korea-EU free trade deal. In 2018, total trade between the UK and South Korea had reached £14.6 Bn. Similar deals has been carved out with countries in Central America (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama); Andean countries (Colombia, Ecuador and Peru); Caribbean countries (12 countries, including Barbados and Jamaica) and others.
The UK has also signed ‘mutual recognition agreements’ with a few countries such as US, New Zealand and Australia. There agreements are not free trade agreements; however they portray an effort to maintain trade continuity.
So, the UK has not been idle. Progress has been made at maintaining ties. By signing the 13 deals, UK has secured continuity on £89 Bn of trade, a stark improvement over the £39 Bn it had been able to secure three months ago. However, rolling over all the deals before 31 October could prove to be challenging as the existing agreements are likely to have references to EU law and some of the partner countries will be apprehensive to sign agreements given the uncertainties surrounding Brexit.